U.S. Dollar Index (DX) Futures Technical Analysis – Downtrend Reinstated as Treasury Yields Plunge

U.S. Dollar Index futures are trading at their lowest level since February 26 on Friday after the release of a government jobs report that came in well below expectations. The news dampened hopes that the surging economy would encourage the U.S. Federal Reserve to begin tightening policy sooner than expected.

Treasury yields also plunged on the news as it sent a clear message that U.S. interest rates would stay at ultra-low levels for quite some time. Expectations of even lower yields are going to keep the pressure on the greenback.

At 18:25 GMT, June U.S. Dollar Index futures are trading 90.275, down 0.661 or -0.73%.

Non-Farm Payrolls increased by only 266,000 jobs last month after rising by 770,000 in March, the Labor Department said in its closely watched employment report on Friday. Economists polled by Reuters had forecast payrolls advancing 978,000 jobs.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed earlier today when sellers took out the last main bottom at 90.395. The main trend will change to up on a trade through 91.435.

The nearest resistance is a short-term retracement zone at 91.110 to 91.565.

Short-Term Outlook

Look for the selling pressure to continue as long as Treasury yields continue to drop. The downside momentum appears to be strong enough to drive the index into the February 25 main bottom at 89.655 over the near-term.

We could see a technical bounce on the first test of 89.655, but if it fails, the index is likely to accelerate into the January 6 main bottom at 89.155.

At this time, there is very little incentive to buy the U.S. Dollar. With yields falling back to more reasonable levels, it may take a while for the index to form a new support base.